Offshore vs Onshore Software Development: Considerations and Differences
According to IDC, by 2025, 3 out of every 4 business leaders will leverage digital platforms to adapt to new markets and industries. Now more than ever, businesses recognize the value of IT to their company’s strategy. Many companies are turning to outsourcing to help realize that strategy to drive growth.
Data integration and improved operational efficiencies are all top priorities for improving the customer experience and accelerating revenue. With technology evolving at a rapid pace, companies may find it difficult to operate and innovate at the same time. Outsourcing helps companies capitalize on emerging technologies to transform their business model. Onshore software development and offshore software development are two outsourcing models to consider. But which is right for you? Let’s explore.
Reasons for Outsourcing
Outsourcing software development isn’t an easy decision. You may have considered keeping development in-house, but realize it may be more advantageous to seek outside input. There are many reasons why outsourcing would be a good strategy.
- Limited financial resources
- Need for a specific skillset
- Need to increase productivity
- Need to scale team quickly and easily
Whatever the reason, you have two main options. Onshore development is ideal for acquiring talent close by. Offshoring, on the other hand, takes you across borders.
Onshore Software Development Model
Onshoring is when companies hire developers from within their own country. These developers work with a third-party company that provides you with development resources for your project. Many companies prefer this model for several reasons. For one, some companies prefer to support their country’s economy. Hiring onshore development invests in resources that benefit businesses at home. Another reason is that some companies are uncomfortable working across borders. Why? Because they aren’t comfortable dealing with regulations in another country, potential language barriers, and time zone differences. In this case, they stick with a more comfortable solution.
Advantages of Onshore Development
Working with onshore resources offers you greater insight into hiring. It also gives you more access to how those developers are utilized for your project. You are likely to feel more connected and empowered with the team nearby.
- In-Person Collaboration — With in-person meetings, camaraderie and trust are established. The team builds a relationship, and all parties fully commit to the project’s success. Secondly, it is more cost-effective to meet with an onshore team as the company saves money on international travel costs.
- Clear Communication — Clear communication is critical to keeping everyone in sync. Having everyone on the same page is critical to the project’s success.
- Fewer Iterations to Achieve Quality Product — Questions, concerns, and information can get handled faster with onshore development. Since the team works the same business hours, there’s no delay. And no delays equate to fewer iterations. Accordingly, the work can keep progressing to complete the project on time.
Disadvantages of Onshore Development
Despite these benefits, there are downsides. Managing costs is the biggest drawback.
- Higher Costs — Onshore development talent is expensive. This is especially true for complex projects. Per Glassdoor, the average developer’s salary in 2020 was $95 thousand. Compare that to Norway’s average of $74 thousand.
- Smaller Talent Pool — The IT labor shortage is causing major problems for companies looking to embrace digital transformation. According to ZDNet, IT leaders see the shortage of skilled IT workers as the biggest barrier to adopting emerging technology. As a result, companies find it difficult to find quality candidates for their projects.
Offshore Software Development Model
Offshoring refers to hiring development talent outside the company’s national borders. With this model, all resources work overseas. Rather than face-to-face, communication largely takes place through video conference, email, or telephone. As a result, this approach may leave you feeling a bit disconnected. However, there are positives.
Advantages of Offshore Development
When comparing offshore vs onshore development, the most notable benefit of offshoring is cost-efficiency. However, there are additional benefits, and cost should not be the only factor.
- Cost-Effective — Companies turn to offshore development to cut costs. Resources in many countries are less expensive than in the US.
- Fast Turnaround Time — Offshore companies typically have a larger workforce — as inexpensive labor rates mean they can hire more people. Accordingly, many offshore companies have standby workers ready to take on projects quickly.
- Access To Broader Skillset — Companies in highly-populated, overseas offshore locales typically have talent pools with a more extensive range of skills. Because of this, companies can source talent with expertise in a wide range of technologies.
- Good For Long-Term Maintenance — It is costly to keep onshore developers on staff to perform basic maintenance work. Hiring an offshore team for these basic tasks can make better use of the maintenance budget.
Disadvantages of Offshore Development
In exploring offshore vs onshore development, hiring offshore developers for cost savings doesn’t necessarily translate to a successful project. There are many cases where this isn’t ideal.
- Communication Barriers — Communication is challenging in a country where English isn’t the primary language. Discussing requirements with someone who doesn’t know the language leads to misunderstanding. This could lead to miscommunication about data, architecture, or user requirements. Consequently, project quality suffers.
- Time Zone Differences — Time zone differences add further challenges to offshoring. Information sharing is delayed. Depending on the country, your communications could be delayed by an entire day which may delay the timeline.
- Quality Issues — With an offshore team, you don’t have control over who the developers are. This means you’re relying on the offshore partner to hire the best candidates. Unfortunately, they may not hire quality candidates if they hire based on the cheapest rate.
- Intellectual Property (IP) Issues — One critical thing to keep in mind when evaluating offshore vs onshore software development is IP issues. Offshore companies may not adhere to your country’s copyright and IP laws. There could be many reasons for this. They may not know your country’s regulations, or their country may not have strict regulations over copyrights and IP.
Offshore vs Onshore Software Development: Which Model Works For You?
Should you look outside your borders for software development talent? Or would it be best to keep things close to home? There is no one right or best choice. Each option has its advantages and drawbacks. Depending on your needs, budget, and objectives, both methods can provide success.
If you need a complex custom app and your budget is flexible, onshoring may be the best option. You won’t face communication or cultural barriers. The team can communicate face-to-face to ensure everyone is on the same page about requirements. However, if your project is simple, and you are budget and resource-constrained, offshoring can be beneficial. You’ll get a larger talent pool at lower rates compared to the US.
The Aezion 2-in-the-box Model
Fortunately, you don’t have to choose one or the other. Aezion is a globally resourced company with headquarters in Dallas, TX (US Central Time zone) with the ability to customize a team that is either completely US-based or a hybrid of US and India-based employees. When deploying a hybrid team, Aezion operates with a 2-in-the-box management model that pairs our India-based development talent with senior, client-facing management based in the US. The baseline work hours of our teams include the standard business days in CST and IST time zones. Our hybrid US-India teams provide you with onshore convenience, offshore economics, and an effective virtual 24-hour business workday due to complimentary time zones.
If you want to explore outsourcing for your project, consider speaking with one of our experts. We’ll help develop the best model for your project. Contact us today to discuss your custom project.